Oman's new Sultan faces significant structural challenges, S&P

Oman launched the National Programme for Fiscal Balance (Tawazun) in 2019, to curb its fiscal deficit over the medium term.

S&P's negative outlook on the Sultanate reflects the risk that fiscal and external buffers will continue to erode/Bloomberg

by Kudakwashe Muzoriwa

Oman's newly appointed Sultan has a narrowing window to address the country's fiscal and economic challenges, amid a backdrop of weak oil prices.

S&P Global stated that following a smooth transition of power in Oman (BB/Negative/B) the public statements by Sultan Haitham bin Tariqal-Said affirmed the expectation of broad policy continuity.

Similarly, S&P added that its negative outlook on the Sultanate reflects the risk that, in the absence of substantial fiscal measures to curtail the deficit, fiscal and external buffers will continue to erode.

Sultan Qaboos bin Said, the longest-serving leader in the Middle East, passed away on 10 January 2020, following almost 50 years of rule.

S&P said that Sultan Haitham will face a difficult trade-off in the coming months between addressing social concerns—partly arising from weak growth and high youth unemployment—and rising fiscal, external and funding pressures.

Oman’s reliance on external debt, given the relatively small size of the domestic markets, is a key contributor to S&P’s negative outlook and a higher risk premium in the event of escalating regional geopolitical tensions could further pressure already-rising debt-servicing costs.

Moody’s expects Sultan Haitham to follow in the footsteps of his predecessor by maintaining the country’s foreign policy neutrality in the region and a very gradualist and socially sensitive approach to economic reforms.

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